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IRS Marks EITC Awareness Day; Highlights Expanded Tax Credit

January 28th, 2010 | Author: admin

WASHINGTON — An expanded Earned Income Tax Credit means larger families will qualify for a larger credit, offering greater relief for people who struggled through difficult financial times last year, the Internal Revenue Service said today.

The IRS and the Treasury Department marked EITC Awareness Day as tax partners nationwide worked to highlight the availability of this important tax credit. EITC, which is in its 35^th year, is one of the federal government’s largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 Billion in benefits. The average credit was more than $2,000.

“The IRS understands that 2009 was a difficult year for many families. EITC has been expanded to help people as part of the economic recovery efforts,” said IRS Commissioner Doug Shulman. “Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier.”

Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children.

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IRS Announces Qualified Disaster Treatment for Haiti

January 26th, 2010 | Author: admin

Washington – The Internal Revenue Service today issued guidance that designates the earthquake in Haiti in January 2010 as a qualified disaster for federal tax purposes. The guidance allows recipients of qualified disaster relief payments to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status.

"Right now when many of us are helping with donations to bring relief to earthquake victims in Haiti, it is very important to know what is allowed under the federal tax law."

-Said Joe Munoz, spokesman for the IRS.

Charities usually fall into one of two categories – public charities or private foundations. Under the tax law, a private foundation that is employer-sponsored may make qualified disaster relief payments to employees affected by a qualified disaster. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

Qualified disasters include Presidentially declared disasters and any other event that the Secretary of the Treasury determines to be catastrophic. The IRS has determined that the earthquake in Haiti that occurred this month is an event of catastrophic nature for purposes of the federal tax law.

The IRS will presume that qualified disaster relief payments made by a private foundation to employees and their family members in areas affected by the earthquake in Haiti to be consistent with the foundation’s charitable purposes.

IRS Seeks to Return $2,3 Million in Undeliverable Refunds to Taxpayers in Michigan. IRS Reminds Taxpayers to Use E-file and Direct Deposit

November 9th, 2009 | Author: admin

WASHINGTON — The Internal Revenue Service is looking for taxpayers who are due to receive a combined $2,3 million in the form of 2,009 refund checks that were returned to the IRS by the U.S. Postal Service due to mailing address errors.

“The money that has not been claimed could greatly benefit its rightful owner.” Said Joe Munoz, IRS Spokesperson. “All a taxpayer has to do is update his or her address once.”

The IRS will then send out all checks due. Undeliverable refund checks average $1,181 this year.

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Six Facts about the American Opportunity Tax Credit

September 30th, 2009 | Author: admin

Many parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit. This tax credit is part of the American Recovery and Reinvestment Act of 2009.

“Education has always been the best tool to achieve professional success.” Said Joe Munoz, IRS Spokesperson. “This tax credit brings a great opportunity to many students and parents to make that dream a reality.”

Here are six important facts the IRS wants you to know about the new American Opportunity Tax Credit:

1. This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.

2. The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000 per student each year. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

3. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.

4. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.

5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.

6. You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction, which ever is more beneficial for you.

Complete details on the American Opportunity Tax Credit and other key tax provisions of the Recovery Act are available at the official IRS Web site at IRS.gov/Recovery.